HyreCar Inc.
Q4 2019 Earnings Call Transcript

Published: 26 Mar 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the HyreCar’s Fourth Quarter and Year-End 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to turn the conference to your speaker today, Joe Furnari, CEO. Please go ahead, sir.

[Joe Furnari:]

Thank you, operator. And at this time, I'd like to welcome all to our Fourth Quarter and Full Year 2019 Conference Call. We are all experiencing unprecedented times in our work and home life as we confront the global pandemic of COVID-19. We trust that all of you are safe and we thank you for being on the call today.At HyreCar, we have taken measures to manage our way through this environment in order to protect our employees and help our drivers to position themselves in this new environment. Navigating the uncertainty in the market has been a full-time job recently. But these times will test and prove the value of our business model as a platform for people and companies to participate in the rapidly changing transportation industry.We may even see this crisis contribute to the acceleration of transportation change. We have given update on the state of the business and provide you with some insights and to what we think the future holds.Before we get started, I'd like to take this opportunity to remind you that during this call, we will be making forward-looking statements within the meaning of federal securities laws regarding HyreCar Inc. Forward-looking statements include, but are not limited to, statements that express the Company's intentions, beliefs, expectations, strategies, predictions or any other statements relating to its future earnings, activities, events or conditions.These statements are based on current expectations, estimates and projections about the Company's business based in part on assumptions made by management. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in our documents that the Company files with the U.S. Securities and Exchange Commission.In addition, such statements could be affected by risks and uncertainties relating to factors beyond the Company's control. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law.Our discussions today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for, or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results will be found in our earnings release and supplemental materials, which will be furnished with our Form 10-K that will be filed today with the SEC and will also be found on the Investor Relations portion of our website.So first, our top priority has been the health and safety of our staff and everyone who uses our platform. We’ve implemented work from home to keep our staff safe and thankfully we haven’t had any confirmed cases of COVID-19 in our workforce or that we are aware of in our driver population.At the same time, we are taking action to solidify our business and make sure we are set to come out of crisis stronger than before. And the most important thing to know is that we are well positioned to weather this crisis.We have ample liquidity. We have a highly variable cost structure. We have an agnostic platform that allows our drivers the ability to pivot in this crisis to focus more on transporting food and package delivery services versus people and multiple levers to pull to reduce burn.There are also strong case studies as how our business is likely to rebound after a shock like this. All of this gives us confidence.In any crisis, liquidity is key. We are very fortunate to have a relatively strong cash position with all $8 million of unrestricted cash currently and zero debt. We are taking actions to approach cash neutral in the near-term with very little burn. Actions include, reducing marketing spend, reducing some of our fixed ops expenses, renegotiating our variable insurance costs, reduced travel and reduced G&A.At this point, we are now looking at reducing headcount and we’d prefer to spread cost controlling measures across the whole company.So in the first two weeks of March, we had our strongest revenue weeks ever. But from that peak, our active rentals had leveled off and are down about 25% peak to trough. This is relatively strong, compared to Uber and Lyft, where they are seeing ride declines of approximately 70% year-over-year in certain cities. One reason for our relative strength is that we have shifted our messaging to food and package delivery.Our ads have moved away from a ride share keyword search and focused on a food and package delivery keyword search and because of this shift, we have not experienced a drop in driver leads over the past three weeks.We have started communicating a list of services that the drivers can use as a guide to find alternative streams of income, as well as encouraging car owners to keep their vehicles clean and lower their prices if possible making it easier for drivers to get on the road.Automated messaging has been built for the sales and marketing team to provide thoughtful and helpful communication during these times. To ensure everyone can see the changes we've made, we also added a banner to the landing page to encourage drivers to sign up for these delivery services.Driver sales agents have started an outbound call strategy so that we are becoming a trusted advisor to our driver partners and we are making sure we're picking up the phones because our customers will remember we were the ones that picked up when other companies did not.We have switched to delivery services during this crisis and we have seen the unprecedented growth in delivery for companies in the food and package space. Uber announced their self-service restaurant portal was seeing 10x the amount of volume in the past couple of weeks. And even in Seattle where COVID-19 has hit the hardest, their team was seeing 2.5x activity over the normal volume.Amazon has released that it is hiring 100,000 workers to deal with the demand and Instacart said on Monday, that it will be hiring 300,000 more personnel shoppers as grocery delivery demand grows over 150%. This is in addition to DoorDash, Postmates and other restaurant delivery companies seeing a greater rate of new clients signing on to their service and needing drivers to help with demand.So moving forward, I expect our strategy of transitioning drivers to food and package delivery will start to show in our active rental day counts. But it’s still too early to tell how this will impact revenue. Our new unique drivers renting a new car have continued to grow sequentially month-over-month although at a normalized rate this past week or so.New cars on the platform are sourcing predominantly from existing dealer groups as most new franchise dealers have slown down from registering and plating cars because of DMV closures.So going back to the fourth quarter numbers, we reported another outstanding quarter with revenues increasing 30% sequentially to $4.8 million from $3.7 million when compared to the third quarter, increasing 50% from the same period last year.Rental days grew to approximately 197,000 in Q4 from 146,000 in the third quarter and unique drivers added to the platform rose 69% to 4,873 in the fourth quarter of 2019 as compared to 2,876 new unique drivers added in the fourth quarter of 2018.Full year revenue was $15.9 million increasing 62% from $9.8 million in 2018. For the full year, rental days grew over 61% to approximately 621,000 days from approximately 385,000 days in 2018. We said on the call that we expected to see a substantial uptick of cars, rentals and subsequent revenue from that activity in Q4 and continued sequential and year-over-year revenue growth throughout 2020.As I just said in the first quarter, we saw rental activity grow from month-to-month. Growth leveled off in the past week as various states have put stay at home rules in place and our work to switch people to delivery has about a ten day lag from signup to acceptance.We are working hard to keep our drivers employed by helping them switch to delivery and using this period to strengthen our commercial dealer and OEM activities to ensure that we will have plenty of cars for drivers now as more drivers move to delivery and for when the country returns to normal. Most importantly, we have enough cash to weather the storm and our people are safe and productive working from home.While these cars represent future revenue growth, obviously, there is still a major asymmetry between the driver leads we're generating and the cars listed on our site. So we continue to increase our investment in people and systems and in our commercial and dealership initiatives in order to close this gap between supply and demand as we scale our inventory to meet demand for vehicles on our platform.Our partnerships group is focused on accelerating the OEM pilots currently in progress. We will use this time to continue to build relationships and integrate our technology with our partners. Our recently announced partnership with Clutch is a case in point.We have begun to onboard new dealerships and are working on a technology integration that will allow Clutch and us to provide services to the dealer marketplace.This is part of the long-term plan for our company and part of our strategy that will expand our company to integrate our services and platform into the dealer software platforms for both used and new cars. This will position us for the long-term as a mobility-as-a-service company and will allow many participants in the market to integrate into the car sharing and mobility market as it grows and changes.Continuing to build car capacity and scaling dealership initiatives were the main themes of our dealer initiatives in Q4. To give you some sense of the increase in commercial bookings, the number of cars that were rented on our platform for commercial partners increased 52% from Q3 2019 to Q4 2019.We expect to increase the commercial cars on the platform by working with our current and prospective commercial accounts now, so that we have cars to scale the delivery drivers that we’re expanding into as part of the recent changing landscape and who will be expanding cars, afford drivers when the ever expanding safe at home or shelter in place policies are replaced and people start using TNC platforms for their personal and business transportation needs again.We are also seeing utilization improve as dealers become a larger part of the vehicle inventory. Utilization will become a more important KPI to track in the future because we found that dedicated commercial supply in the platform is being rented greater than 90% of the time, whereas individual or peer-to-peer supply is under 75%.A few reasons for this utilization include owner response time to booking requests, availability for key exchanges and competitive pricing and car quality. As the shift in mix of inventory continues to weigh more heavily towards dealers and fleets, we expect overall utilization rates to increase.Post March 15, our overall utilization has leveled off to a more historic 70% from a high of mid-80% post pre-March 15th. We expect to get back to the mid-80s to low 90s as the driver mix moves toward package delivery over the remainder of this unique period and for the remainder of the year, as rideshare returns to historic levels.Our integration of the new dealership portal and related technology tools, combined with the onboarding of veteran automotive sales executives to our HyreCar team has created an environment where dealers and OEMs have trust that we understand their needs and can efficiently onboard vehicles and match the HyreCar platform.The success of our dealer initiatives to-date is proving that the HyreCar platform helps dealers and OEMs to collaboratively partner with a transportation as a service provide to leverage this monumental shift in the transportation industry that is affecting their core businesses and a win-win business model for both.In addition, we compete against vertically integrated asset heavy models that have a high cost structure relative to our asset light model of scalable growth based on more of a SaaS ecosystem. Fair.com, as you know, from their recent scale back is no longer providing cars to drivers on Uber and Lyft and we are seeing opportunities to benefit from this exit especially in states like California and Georgia.This gives us increased confidence in our asset light business model as a partner with commercial dealerships where we help them build their business and become larger and more profitable even as we build our business to scale in a fiscally prudent manner.I’d now like to turn the call over to Scott Brogi, our Chief Financial officer to walk through some key financial details from the quarter and the full year. Scott?

[Scott Brogi:]

Thanks, Joe. Before I review the financials, I want to give an update on important aspects of the 2019 audit. First, in regards to the audit itself, our 2019 audit remains ongoing due to some logistical issues related to COVID-19.The primary remaining item for the completion of the 2019 audit is finalizing the insurance reserve. We have had trouble getting necessary data from our service providers and accordingly, that is lengthening the time required for our auditors to complete this analysis.We expect our insurance reserve to increase in proportion to the increase in rental days we’ve experienced as a result in growth in our core business. In the numbers that follow, we have taken a very conservative approach to report unaudited numbers and included a significant cushion which will ultimately be finalized in our audited figures.These results remain subject to adjustment and we will advise and update these numbers when the audit is complete and the 10-K is filed, which we expect to occur in approximately two weeks.Second, we have been working with the SEC, following their routine review of our 34x filings focusing on the 2018 10-K. They asked us to consider classifying insurance claims payments into the cost of goods sold line above the gross profit line versus the 2018 classification of the insurance claims payments into general and administrative operating expense in our income statement as this has recently become an industry standard with our transportation peer group for companies like Lyft, Uber and car rental companies.This change is EBITDA neutral and has no impact on our earnings numbers previously reported as we are moving the expense from below the gross profit line to above it and accordingly reduced both our gross profit and operating expense equally.Upon further review, we have decided to adopt this classification for insurance claim payments associated with revenue generating activities as cost of sales on a going-forward basis, and so the following results reflect this classification and include the insurance reserve cushion.Going forward, we will report our results in this manner and these results will be reported when the audit is complete and the 10-K is filed.Finally, as we’ve said, we will be taking a few extra weeks to make sure our audit partners and team have ample time to finalize any required adjustments. The audit process was slow significantly this month as all our partners and staff moved to full-time remote work including complying with shelter in place orders by the California governor last week.Even prior to the shelter in place order, we were experiencing delays in obtaining data from partners as it related to audit items outstanding because of COVID-19. I am confident we will finish the audit within the time allotted through filing an SEC form 12b-25. We will advise and update these numbers when the audit is complete and the 10-K is filed.For the twelve months ended December 31, 2019, net revenue increased 63% to $15.9 million and was up 32% sequentially from $3.7 million in the third quarter to $4.8 million in the fourth quarter. Revenue growth in the fourth quarter was primarily driven by increases in net rental days, which grew 35.3% to $197,000 to 143 rental days in the fourth quarter, up from a 145,738 days in the third quarter.I would like to add that these trends have continued into the first quarter of 2020 and we were setting all time highs in booking volumes and net revenue into early March. We were actually at over a 150,000 net rental days through the first two months of the quarter for an annualized rate of over 900,000 rental days, up from just over 600,000 days in 2019.Cost of sales increased for the year ended December 31, 2019 to $10.9 million from $5.1 million in the prior year. This includes approximately $2.8 million in claims formerly classified in operating expenses as well as the additional insurance reserve previously mentioned. Again, we expect our auditors to complete their analysis and hope that this adjustment will ultimately be reduced in our final numbers.Operating expenses increased to $18.2 million for the 12 months ended December 31, 2019 from $13.8 million in the same period of the prior year. This was primarily due to increased sales and marketing expenses to drive the higher business levels.Our net loss increased to $4.2 million, or $0.30 per share for the three months ended December 31, 2019 from $2.6 million or $0.31 per share in the same period of the prior year and from $3.6 million or $0.28 per share sequentially from the prior quarter.For the full year, our net loss was $12.4 million or $0.89 per share versus a loss of $11.2 million in the prior year or $1.31 per share. After backing out approximately $1.9 million in stock-based compensation for the year, our adjusted net loss which is effectively adjusted EBITDA was $10.6 million for the year ending December 31, 2019, compared to an adjusted net loss of $7.1 million for the year ending December 31, 2018.Cash totaled $10.8 million – excuse me, cash totaled $10.6 million at December 31, 2019, an increase of $3.8 million from $6.8 million at December 31, 2018. This increase was primarily the result of the completion of our secondary offering in July 2019. And as of the end of February, we had approximately $8.8 million in cash and marketable securities.Our current focus is on trying to operate as close to cash neutral as possible with all the uncertainty in the marketplace. As Joe mentioned earlier, our business has declined from all-time highs just a few weeks ago during the first week of March. But to this point, it is a manageable decrease which we track on a daily basis.Fortunately, our business systems are now almost entirely cloud-based with great partners like Amazon Web Services, Salesforce, Stripe and ZOOM, allowing our teams to operate very efficiently while at distance.Also, much of our cost structure is variable in nature as Joe said, so activity levels decreased in the near-term also result in many of our larger costs, including background checks, merchant processing and direct insurance charges to decrease as well.We have also instituted a temporary hiring freeze and halted any travel and instead, renewed our efforts to connect with both car owners and car drivers by remotely leveraging our tools to stay in touch with them during these difficult times.Food, as discussed before, food and package delivery are increasing and they very well become the new normal. We are well positioned to participate in this expansion and when things start to come back, we look forward to again investing in top-line growth and continuing to make progress towards cash flow profitably.Now I would like to turn the call back over to Joe to wrap it up.

[Joe Furnari:]

Thanks, Scott. So, in summary, despite an unprecedented environment, we are positioning ourselves to continue to grow rapidly and this growth is fueled by macro tailwinds pushing individuals toward a new future and it’s not just mobility, but also last mile delivery for goods and services.We see HyreCar perfectly positioned to enable drivers, OEMs, auto dealers and fleet operators access to the transportation-as-a-service opportunity and for all to earn revenues from participating rather than disintermediating the traditional players.Feedback from our OEM and dealership initiatives has been positive. So we are doubling down on efforts to build scale and capacity into the platform to accommodate our vehicle suppliers. Driver demand continues to be robust and providing a consistent value-add experience for our driver customers has been a key focus.To conclude, I believe HyreCar is reaching a positive inflection point, which will be a bit slower now due to the crisis, but we continue to move in a positive direction and I look forward to continued operational execution and shareholder value creation over the long-term.With that, I will turn it over to the operator. Operator?

[Operator:]

[Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities. Your line is now open.

[Mike Grondahl:]

Hi. Yes. Thanks guys. So it sounds like, up until early March, you were running at roughly 75,000 to 80,000 rentals a month and you are down, I think you said roughly 25% from there. One, has that bottomed yet? Or and am I doing the math right, you are about 55,000 to 60,000 rentals a month now?

[Scott Brogi:]

Yes, I mean, this is Scott, Mike. I would just say that, definitely for January and February, those were both in right around the 75,000 rental day range. There were two fewer business days in February than in March.And for sure, the way we started the first week in March, we were well on our way doing 80,000 days plus quarter. So it has eased off a bit. It’s kind of in that 25% range the last couple weeks. And so, we’ll just see where that ends up for the quarter when we close it on next Tuesday. And then, when we step into the second quarter.

[Mike Grondahl:]

Got you. The Clutch relationship, it sounds like you are working on an integration there to kind of make that a little bit more fluid. When do you anticipate that being complete? And then, on the insurance, I think you have insurance renewal April 1, 2020. What do you kind of expect from that renewal?

[Joe Furnari:]

Well, I’ll handle Clutch and then I’ll let Scott takeover the insurance piece. But, with Clutch, we couldn’t have timed that more perfectly with heading into NIADA. We generated a tremendous amount of buzz and probably had about 25 sales agents at NIADA. We had about eight sales agents and there was a lot of cross-pollination happening while we were at the event.A lot of dealers coming up to me and saying, hey, I was just at the Clutch booth. They love what you guys are doing and tell us more about HyreCar and how we can get into gig. So that relationship is going to move in the first phase into a very light technical integration.I don’t have a timetable in terms of when that integration is finalized just because of what’s happening in the broader environment right now with COVID. So, but, that is – that asset light integration is an ability for dealerships to list vehicles on our platform with a push of a button both from onto the Clutch platform, as well as on to the HyreCar platform.So, I don’t have a timetable, but I am really excited because there is a lot of low-hanging fruit right now that we can go after with Clutch and HyreCar combined as a holistic offering to dealerships that are looking to get into transportation services. And then, I’ll let Scott now talk about the insurance reprice right now.

[Scott Brogi:]

Sure. Yes, you have good memory, Mike. We are definitely coming up on our annual renewal. We’ve kind of been working on it since January and we have several brokers and about a half dozen insurance carriers that are participating in that process. So we started to receive quotes for the forward period.I think one of the important thing that we want to make sure is factored in there is as we see the opportunity for our agnostic platform to grow through food service package delivery that we have the ability to support all those needs. So, we expect to wrap that up in the next three weeks basically. And we’ll be excited about talking about that on our Q1 earnings call.

[Mike Grondahl:]

Got it. And then just lastly for me, it looks like in January and February, you burned roughly $1 million a month. Where do you expect that burn to go going forward?

[Scott Brogi:]

Yes, I mean, it’s a great question. As we said, we’ve got a fair amount of our cost structure is variable. So, part of that is already coming down with the reduction in business. We have a couple different scenarios that we’ve modeled for Q2 and then the rest of 2020. So we are trying to bring that down as much as possible and get us to close to cash neutral.I think, one of the real opportunities we have coming up with that insurance renewal is to improve the way the cash flow works on the insurance program. So I'm actually pretty hopeful that with that renewal, we’ll get very close to that and be able to significantly shrink it heading into Q2.

[Mike Grondahl:]

So, do you think the insurance renewal will help with that – help decrease the cash burn a lot? Is that we were seeing lot of the $1 million?

[Scott Brogi:]

Yes, the payment terms that we have on our current program, we are looking to improve those and we’ve actually had a lot of positive conversations with some of those carriers. So that’s the piece obviously your direct insurance number comes down when you have fewer days on the platform.We also have upfront cost like the background checks we do as you are pushing more – less volume through, that’s going to decrease that as well. So a lot of our cost structure is actually variable in nature. So, as volume decreases, the costs are going to decrease as well.

[Mike Grondahl:]

Okay. Thanks guys.

[Scott Brogi:]

Yes.

[Operator:]

Thank you. Our next question comes from John Godin with Lake Street. Your line is now open.

[John Godin:]

Hey guys. Can you hear me okay?

[Joe Furnari:]

Yes.

[John Godin:]

Awesome. Thanks for taking the question. First, as we switch to kind of a more food and package delivery. Is there any difference with the revenue model or anything else on a unit level basis that that would be different from kind of the rideshare revenue models?

[Joe Furnari:]

Well, so, what we are seeing right now just the anecdotals that we are seeing from our drivers, yes, they are making good money right now. We had one example where he have been driving for three days and he made over $700 which is a pretty good return for our driver base.So, from that perspective, I am seeing the opportunities now moving away from ridesharing and more towards package and food delivery. From a unit economics, maybe Scott could speak to that a little bit on it. But from my perspective there isn’t much change.

[John Godin:]

Got it. That’s helpful. And second, just kind of thinking about the regulatory environment is in California and now Massachusetts as well. Is there anything else out there that’s changing as far as how gig economy workers are treated? Or anything else you guys are hearing that you think is important to address?

[Joe Furnari:]

Well, in places where you have shelter in place, the essential personnel include delivery drivers. And so, that’s a key point that we are communicating to our driver base that our sales team is communicating and this effort to be a trusted advisor to them to those drivers.And so, I think that that’s a big piece for somebody who wants to continue to drive, needs to continue to earn, let’s move you over to a Instacart or DoorDash or a Postmates platform and it’s very simple given the agnostic nature of our platform.We are generating an insurance card in the name of the driver which means that he can use that to drive for any of the platforms. So, that’s a key aspect to this crisis that we are seeing and that they can drive now as essential personnel.

[John Godin:]

Got it. And then, last is on the gross margin. Obviously, over the past few quarters it’s been trending up nicely in part due to kind of the shift to a more premium insurance tier and lower insurance rates. I guess, thinking about that going forward and the shift now into OpEx, it’s what would kind of be a good maybe runrate to think about and then maybe how that flows through down to EBITDA, as well?Is it going to be a direct flow through? Or will there be any kind of incremental costs on the OpEx side as well?

[Scott Brogi:]

Well, I think there is – you continue to see scale as we increase revenue dramatically without really having to change headcount much for example. So, I think, kind of what I am modeling going forward is it’s about a 10% to 15% shift in gross profit. So, if we were previously in kind of the pushing up over 60%, you are probably in the 45% range.Just to kind of give you a place to start and then we’ll be updating that when we do our Q1 release as well and we can see – show exactly what that gross profit margin is. But I think, basically what you are going to still see, even though it slowed a little bit here is with the next uptick in revenue, a lot more of that has started to drop to the bottom-line.So that impacts the gross margin and the EBITDA margin. So I think we are starting to see some of those scales of efficiency happen as you can continue to grow the top-line with the existing team leveraging some of the new tools that we have brought on.

[John Godin:]

Right. Thanks for your time guys and hope you all stay healthy.

[Joe Furnari:]

Thanks, John.

[Operator:]

Thank you. Our next question comes from Jon Hickman with Ladenburg. Your line is now open.

[Jon Hickman:]

Awesome. Thanks for taking my questions. First of all, let me just make sure I understand for 2019, you are reporting your insurance expense as part of above the gross margin line and then expense will no longer be in – in the operating expenses areas? Is that right?

[Scott Brogi:]

Correct. Yes. That was about $2.8 million that was formerly in OpEx for the full year and so that moved directly from the claims line within OpEx up into cost of sales, along with the direct insurance that we currently play on a weekly basis, right.And that’s 75% of that expense is the direct expense that we pay regularly and so this is getting added to that to again be consistent with sort of the increasing industry standard in terms of how the TNCs and the other rental car companies are dealing with that. But, so that component is EBITDA neutral.

[Jon Hickman:]

So, in spite of that $2.8 million is now part of gross margins. You still have a $2 million increase in operating expenses in 2019. So basically, OpEx was up more than $4 million year-over-year?

[Scott Brogi:]

Yes, that’s correct.

[Jon Hickman:]

Okay. So, could you walk through again how you are going to get to cash breakeven then in the next couple of months?

[Scott Brogi:]

In terms of – there is a lot of levers that we can pull right now, anywhere between – there is a lot of marketing spends we can pull out. This insurance reprice is probably going to pull some cash or pull it down to the bottom-line. And there is a lot that was in G&A, for travel et cetera, legal expense, et cetera that I think we can pull out as well.So, we are going to work actively to get that down. I think that it’s a balanced, because we want to be positioned right now to take advantage of the country coming out of this relatively quickly. We see it when people go back to work, we are going to start to see an uptick as well.That’s one of the main key use cases for ridesharing right now is commuting to work. And so as soon as the country gets back to work, we are going to get back to work. So, there is a delicate balance there. But that’s the idea right now.

[Jon Hickman:]

Okay. So, it doesn’t really take a genius to figure out that not too many cars are being sold right now. So, is that going to kind of force – not force, but incentivize dealership et cetera to put their cars on your platform?

[Joe Furnari:]

Well, absolutely. I mean, that’s why we are mentioning in the call that we think there is going to be a big push towards mobility services like ours and the dealer and the manufacturing world as well. I think this is going to accelerate that just because you don’t have a lot of people buying cars.I mean, Cox is saying that it’s going from 17 million estimated in 2020 down to 15 million and that extra 2 million that dealers have sitting on their lots need to be utilized somehow what better way than to throw it on a franchise solution like a HyreCar, Clutch partnership and start to rent it out for a leisure subscription and/or a gig.So, yes, we think there is a great use case there and this crisis is only going to accelerate that which is why I don’t want to cut to the bone and I want to be ready for when this does spring back.

[Jon Hickman:]

Okay. Thank you that’s it for me.

[Joe Furnari:]

Yes. Thanks, Jon.

[Operator:]

Thank you. Our next question comes from Jack Vander Aarde with Maxim Group. Your line is now open.

[Jack Vander Aarde:]

Hey guys. Great quarter, especially given the current environment. Although I know it’s looking back in time before the pandemic, but still a good quarter. The last bullet within the press release under additional fourth quarter metrics, I think you guys cut off commercial inventories start to have begun to accelerate with these two large regional rental fleet partners.So, as with over vehicles in Q4, do you have the number of vehicles that was meant to be included in there from those two partners?

[Joe Furnari:]

I think, Jack, that was probably a holdover from Q3. We were talking about those large southern regional dealers that have come on and now are supplying the bulk of our cars in Florida, Georgia and Texas. So, probably a holdover from last quarter.

[Jack Vander Aarde:]

Okay, no problem. And then, maybe I missed it. But did you or can you provide the total dealership partners and dealer listed vehicles that were on the platform at the end of 4Q or as of today? I think you guys could please provide that metric on a current basis. So, whatever those numbers were? That’d be great.

[Joe Furnari:]

Yes, we have those numbers that kind of moved away from – is a direct correlation to revenue. But gross cars in Q4 was about 5200 out of the commercial accounts. That’s up from 4300. One of the metrics that we hadn’t given in the past was net cars. Net cars is about 2100 out of that 5200. And that is – those are listed and rented.So you can get – kind of the utilization rate there. Well, you can get a utilization rate generally for dealerships and then, in terms of utilization rate up until March 15th, I think we talked about this, it was kind of been in the mid-80s. It’s come off a little bit and more normalized in the sense that we’re around 70% right now. It’s got to be historically where we’ve been over the past two or three years. So it’s come off slightly, but it hasn’t fallen off the cliff, which is, I think, a pretty good sign right now.

[Scott Brogi:]

And, Jack, the only thing I’d add, this is Scott is that, the commercial fleet component of the car supply is now kind of north of 80%. So, that has clearly shifted over the last year or so from being 80%, 20% the other way. So you’ve really seen car supply move into the fleet providers over the last year, year-and-a-half.

[Jack Vander Aarde:]

Got it. And that’s helpful. And then my – just one more is on – I know some other analysts were asking about the unit economics, any changes there. What I want to know or ask about specifically is, has there been any change to that average weekly or daily base rental fee? In the past it’s been around $30 to $35. Has that dropped at all or even increased? Could you talk about that in any further detail?

[Joe Furnari:]

Yes, I think it’s flat right now. I mean, we are literally like 10 to 14 days into the crisis. So, I haven’t seen a drop materially yet, but I’ll keep everyone informed on that.

[Jack Vander Aarde:]

Okay. Great. That’s it for me. Thanks guys.

[Joe Furnari:]

All right. Thanks, Jack.

[Operator:]

Thank you. And our next question comes from Mike Grondahl with Northland Securities. Your line is now open.

[Mike Grondahl:]

Yes. Just a couple more for Scott on the fourth quarter. Scott, I think you said that the cost of goods sold for the year was $10.1 million. Does that include the whole $2.8 million you talked about related to insurance? Or does that just include part of it?

[Scott Brogi:]

No, it pulls the entire $2.8 million up from OpEx into cost of sales. And then, the other component that’s in there as we mentioned, we have put in room for this insurance reserve that’s still being finalized. So, that’s a significant – those two items are a significant piece of that $10.1 million in total cost of sales for the full year.

[Mike Grondahl:]

Got it. Are those basically all in the fourth quarter, then the $2.8 million or is that incremental cost of insurance reserve, all in the fourth quarter?

[Scott Brogi:]

No, it’s quarterly through the year. It is increasing into the second half of the year. And then the insurance reserve piece is in the fourth quarter only.

[Mike Grondahl:]

Got it. And then just moving down to operating expenses, I think you said total operating expenses were $18.2 million. So, can I just back out the first three quarters to get the fourth quarter? And I am trying to figure out how to do that for cost of goods sold too, just to kind of come up with where you guys are sitting in 4Q?

[Scott Brogi:]

Yes. And that’s why I said that I think Q4 takes a heavier hit, because that insurance reserve adjustment is only in that quarter. And that’s why I think GP will be higher on a going forward basis. So, that’s certainly I repeated that on the GP side and then, I think as far as OpEx goes, it’s really looking at that quarterly number and then, kind of annualizing that.If you just took the $18 million, you’d be at $4 million, $5 million a quarter in OpEx, right. So I think, I don’t think there is a lot of extra expense in the fourth quarter. There's a little bit of non-recurring in there.There is some legal fees and some other pieces that we had to cleanup and then of course, you do have that $400,000 in stock-based comp in the fourth quarter. So if you think about it from a EBITDA perspective, you can sort of further reduce that number.

[Mike Grondahl:]

Got it. I think I get the operating expense. But I guess, I am going back to cost of goods sold. In the first three quarters, you ran about $1.5 million, okay, at least reported. And then you are saying, it’s about $10.1 million for the full year. So, basically, $10.1 million minus $4.5 million, call it…

[Scott Brogi:]

5.5?

[Mike Grondahl:]

Yes, $5.5 million. Is that roughly the right 4Q cost of goods sold number?

[Scott Brogi:]

Well, no. Well, you’ve got – again, you’ve got an insurance reserve estimates that’s in there for the time being and so we finished the audit which is making that number higher. We could pull up, I could pull up the – I think we’d have to do a quarter-over-quarter analysis. So, we can do that and follow-up and get back to.

[Mike Grondahl:]

I think what you are also saying is, the $2.8 million, is this all in 4Q on an operating basis, only some of that’s in 4Q. That’s where I think the confusion is.

[Scott Brogi:]

Correct. Yes, I mean, again, it increases quarterly through the full 2019 and so, it was bigger in Q4, but it was in all four quarters, so.

[Mike Grondahl:]

Got it. I mean, that’s where I think people are going to struggle. They don’t know how to model on what is going to look like going forward, so. Okay.

[Scott Brogi:]

Okay.

[Operator:]

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Joe Furnari, for any further remarks.

[Joe Furnari:]

Great. Thank you, operator. And, thank you again for joining us today. We look forward to continuing to update you on our progress throughout the year. Thank you very much.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.